The BLM movement has recently joined forces with the “FightFor$15” activist group to demand a Federal hike in minimum legal wage. What the young activists from neither group recognize is that minimum-wage laws separate the value of services from the price by force of law. When that price – now set by law – exceeds the value generated by even the ideal performance of the task, the “minimum wage” for most unskilled people will drop to zero.
These laws can’t create jobs – they can only outlaw the hiring of people whose skill-level and inexperience prevent them from generating value sufficient to meet the “do-gooders'” arbitrary minimum.
Minimum-wage laws cut the bottom-rung off the wage ladder.
Force-of-Law price-fixing hurts the unskilled beginner or re-starter because they further reduce the number of entry-level jobs overall and slow the rate at which remaining jobs become available. Amazingly, advocates for this political malpractice admit both of these negative impacts!
The stated intent of the mandated wage hike; to “give” greater purchasing power to minimum-wage earners is absurd on its face.
The lowest wage affords lowest-wage purchasing power no matter what number is affixed to it; Its relationship to the broader economy is not changed by reassigning the number by force-of-law.
Advocates for government-mandated wage hikes claim that “costs to employers are offset by reductions in turnover.” Let’s assume their claim about employer-costs being offset is completely true. Is it desirable?
Lower turnover on the first “rung” of the job ladder means:
- People move more slowly from step one to step two and beyond. Even assuming that our government has a moral right to induce constipation at the entry level of the job market, how does doing so move people out of poverty?
- Less frequent openings are created for beginners coming up behind. Why would we want to create that outcome – by force-of-law?
If the intent were to help people move out of poverty, the focus would be on economic mobility; the relative ease with which beginning-level workers (or re-starters) can engage the labor market and move up from entry level in a free-market environment.
Any policy which purposely moves the lowest rung of the ladder further from reach of the least skilled worker and then slows the rate at which he/she moves up is designed to keep the lowest workers down. Who is helped by this? Only the politicians who are adept at converting class-envy and economic stagnation into a permanent constituency – one that can be counted on to set up a raucous of protest in response to proposals which seek to free the private economy from the chains which create dependency.
When I last wrote on this topic, the call for doubling minimum wage by force-of-law was limited to the more left-leaning of individual states, where, predictably, they succeeded. The entry-level workers of those states will now find it increasingly difficult to find a job, and finding one, will feel obliged to hang on for dear life no matter the tedium because they will now be monetizing their time at a rate greatly exceeding the value they are able to generate for their employer.
Needless to say, employers in these states will take measures to limit their exposure to the harm done by a law that forces inequity in their labor relationships.
The “FightFor$15” activists would ensure that no states are permitted to demonstrate that the interests of beginning-level earners are best served by ALLOWING there to be many and varied opportunities for starters and re-starters.
If they succeed, employers will find workarounds. It’s the entry-level worker who will be irreparably harmed by a law that prices his or her services out of the market.
The first rung of the labor ladder must be low enough that the least skilled (least “valuable”) worker can step onto it.
Minimum-wage jobs fulfill an absolutely essential role for both employees and employers and for society as a whole: A society that offers open opportunity at ALL levels – all the way to the ground – and rewards earnest effort is a society that empowers the individual to chart his own path. But they cannot fulfill that role if they cannot be filled by a BEGINNER (or re-starter) who has nothing to offer but willing hands and an earnest heart.
If this essential first run is forcibly yanked up out of the reach of that beginner, the negative impact on society will go far beyond economics.
We’ll have disempowered people throughout the economy. Beginners will find so few entry-points into the job market that it will become a question of “who do you know” rather than earnestness. Those whose wages for low/no-skill jobs are artificially inflated by law will have less incentive to add to the value their work delivers. The difference between beginning wages and the wages offered to levels above will necessarily diminish, providing less achievement incentive overall.
Government-centric societies encourage Mediocrity rather than Excellence and they do that by diminishing individual merit as a factor for advancement.